Do you feel your HR department is unable keep up with the rest of the company? Are you worried that lack of compliance could lead you into trouble? If the answer to any of these questions is yes, it might be time to consider HR outsourcing!
Why HR Outsourcing?
Businesses across the world are looking at outsourcing to ring in operational efficiencies. Many companies are already benefitting by farming out non-core activities such as marketing, finance, and logistics. HR, as a non-profit centre, fits into the same category. The critical nature of HR vis-à-vis business growth and compliance make it ideal for subcontracting to specialist service providers with expert knowhow and years of experience under their belt.
When To Outsource HR
There is a widespread misconception that HR outsourcing is only suitable for small businesses. There is no basis to this as large companies, too, can reap significant benefits from adopting this approach. Situations may arise where HR departments are unable to pull their weight. Turning to outsourcing in these moments of crisis can help you steady the ship while also enabling rationalisation of costs.
Below we list eight signs that indicate it may be time to consider HR outsourcing. Read to see if any of them seem familiar to you.
- Compliance Issues
Businesses in the UAE need to adhere to a strict set of laws like the UAE Labour Law, the Emiritisation policy, and others. Violation of these rules and regulations could result in harsh penalties even though the breach may be unintentional. For example, there could be mistakes related to the classification of employees. Consider farming out your HR work in case you are unsure of the team’s ability to handle these issues.
- Resource Crunch
Having an in-house team means salary expenses as well as considerable overhead costs like electricity and office space. You will also need to provide them with laptops and stationery. These costs can be rationalised through HR outsourcing. HR service providers bring their own staff and infrastructure and perform all pre-agreed services in lieu of a monthly fee. This fee is usually less than what it takes to set up and run an in-house HR department.
- Inefficient Recruitment Process
Employees are the most important resource for a company. Hence the goal should be to try and attract the best talent for the organization. However, an inefficient recruitment process can lead to hiring of sub-par talent which could be a drag on company growth. HR outsourcing also allows you to subcontract a specific category of HR work such as recruitment and use techniques like better candidate sourcing and evaluation to improve the process.
- Rapid Business Growth
Growing too fast can lead to several challenges which your HR department may not be equipped to handle. For example, an unintended effect of increase in hiring could be the recruitment of low-quality candidates. Faulty paperwork and gaps in onboarding could also ensure. Companies experiencing rapid business growth may do well to subcontract a part of the job until adequate capacity has been developed to meet the new requirements.
- Problem with Talent Retention
Nobody understands the value of a good employee better than a promotor or a manager like yourself. More often than not, the reason for high rates of employee attrition can be traced to poor HR policies. Working with a reputable HR outsourcing services provider can help you shore up you HR policies and also offer your employees the kind of benefits that are generally not available to small companies. What’s more, your service providers can help you put in place an effective employee retention programme to hold back your star performers.
- Diversion of Human Resource
Do you feel you are unable to use your employees as you please as too many of them are caught up in non-core functions like administration and HR? You could benefit immensely from HR outsourcing if that’s the case. One of the chief benefits of outsourcing is that it frees up a large pool of resources who can then focus on the key business area or profit centre. In this way, you can regain your primary focus by having many more employees work on the core part of the business.
- Missing Deadlines
Regularly missing payroll or compliance deadlines means that your HR team is probably overworked. Outsourcing some of their work to service providers can help you ease the burden. That way, you can lighten their load without adding significantly to your budget as you will be saving on hiring and infrastructure costs. You can even shift back to the in-house model after a while once capacity expansion has happened.
Outsourcing Brass Tacks
HR outsourcing needs to be a carefully deliberated decision and not a knee-jerk reaction. Use the indicators above to gain an insight into whether it is the right strategy for you. You also need to factor in aspects like company culture, effect on the morale of your team, and strategic alignment with your larger goals and objectives to arrive at a carefully weighted decision regarding the approach.
The process of HR outsourcing is not without challenges, but anticipating them correctly can go a long way in helping you ride the transition and bring significant returns in the long run. It is important to have a well-defined contract and proper service level agreements to eliminate mix-ups and uncertainty at a later stage. Bear in mind that you will have to surrender some of your control to the service provider in return for benefits like cost savings and efficiency, which means it’s important choose your service partner carefully and come up with a clear blueprint of how you plan to work together.
Done right, HR outsourcing has the potential to not only free up resources but also improve employee motivation and promote company growth.
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